Wausau Underwriters Insurance Company v. Reliable Transportation Specialists, Inc. et al

Filing 42

ORDER overruling plaintiff's Objections to Magistrate Judge's Order for Protective Order 29 and denying MOTION to Stay 30 Signed by District Judge George Caram Steeh. (MBea)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MICHIGAN
SOUTHERN DIVISION
WAUSAU UNDERWRITERS
INSURANCE COMPANY,
Plaintiff,
Case No. 15-12954
vs.
HON. GEORGE CARAM STEEH
RELIABLE TRANSPORTATION
SPECIALISTS, INC., AMARILD
USHE and BURT HOLT,
Defendants.
____________________________/
ORDER OVERRULING PLAINTIFFS’ OBJECTIONS TO
MAGISTRATE JUDGE’S ORDER DENYING MOTION FOR PROTECTIVE
ORDER [DOC. 29] AND DENYING MOTION TO STAY AS MOOT [DOC. 30]
This case stems from an underlying lawsuit (the “Holt Lawsuit”) filed by Burt Holt
against Reliable Transportation, Amarild Ushe and a co-defendant who is not a party to
this action, related to injuries sustained by Holt when he was struck by a tractor trailer
operated by Ushe. On July 28, 2015, an Order of Judgment was entered in the Holt
Lawsuit against Reliable Transportation, Ushe and the co-defendant. The amount of
the judgment entered against Reliable Transportation and Ushe jointly is $8,735,142.35.
The present litigation arises out of plaintiff Wausau Underwriters Insurance
Company’s (“Wausau”) declaratory judgment complaint seeking a declaration from this
court that it is responsible for no more than the policy limit of $1,000,000.00 of
insurance under the commercial policy issued to Reliable. Reliable Transportation and
Ushe filed a counterclaim alleging that Wausau acted in bad faith against its insured by
refusing to negotiate a settlement within the policy limits in the Holt Litigation.
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Wausau filed a motion for a protective order seeking to exclude Holt from
receiving information produced by Wausau in discovery regarding settlement efforts in
the Holt Litigation. Holt submitted discovery requests to Wausau requesting their
complete claim file and all documents which reference their settlement decisions and
strategy in this matter. Wausau contends that information in Wausau’s possession
regarding settlement negotiations and related analysis or defense of the claims in the
underlying Holt action are confidential, sensitive and/or protected or privileged and
should not be produced to Holt. The underlying appeal remains pending and could.
Wausau argues that disclosing protected and sensitive information to Reliable and
Ushe’s adversary in the Holt Litigation while Wausau continues to defend Reliable and
Ushe in that case would cause annoyance and oppression.
The magistrate judge denied Wausau’s motion for a protective order. The basis
of the denial was that Wausau failed to make “a good cause showing that a protective
order is necessary to protect it ‘from annoyance, embarrassment, oppression, or undue
burden or expense . . . .’ Rule 26(c).” (Doc. 28, p. 2). The magistrate judge pointed out
that by initiating the lawsuit “Wausau placed into issue whether it acted in bad faith so
as to be responsible for the entire Holt lawsuit judgment.” Id. The magistrate judge
continued that “[a]lthough Fed. R. Evid. 408 usually precludes the admissibility of
evidence regarding settlement negotiations, Wausau has waived the protections of Rule
408 by placing its good faith into issue.” Id. at p. 3. The matter is presently before the
court on Wausau’s objections to the magistrate judge’s order denying Wausau’s motion
for protective order.
Federal Rule of Civil Procedure 72(a) provides that “[t]he district judge in the
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case must consider timely objections and modify or set aside any part of the
[Magistrate’s] order that is clearly erroneous or is contrary to law.” At a status
conference with the court, Holt agreed to a temporary stay of the magistrate’s ruling
whereby discovery could go forward and he would not receive any documents related to
settlement or strategy pending this court’s ruling on Wausau’s objections.
Parties may obtain discovery on any matter that is not privileged and is relevant
to any party’s claim or defense. Fed. R. Civ. P. 26(b)(1). “Relevant evidence” is
“evidence having any tendency to make the existence of any fact that is of consequence
to the determination of the action more probable or less probable than it would be
without the evidence.” Fed. R. Evid. 401. However, the scope of discovery is not
unlimited, and a “court may, for good cause, issue an order to protect a party or person
from annoyance, embarrassment, oppression, or undue burden or expense.” Fed. R.
Civ. P. 26(c). Wausau’s position is that if Holt is given discovery that discloses
protected and confidential defense-related evaluations and analysis of the Holt
Litigation, it would prejudice Reliable and Ushe’s ability to vigorously defend the claims
arising from a potential retrial of the matter, at both their and Wausau’s expense.
Wausau continues to defend Reliable and Ushe in the appeal of the Holt Litigation.
Wausau asserts clear error in that the magistrate judge concluded that Wausau
had not asserted “any of the[] bases” required under Rule 26(c). Furthermore, Wausau
contends that the magistrate judge misconstrued the basis of the motion by addressing
Fed. R. Evid. 408, regarding the admissibility of settlement negotiations, which none of
the parties raised, and which does not apply to the present situation.
Defendants take the position that by filing the declaratory judgment complaint
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and naming Holt as a defendant, Wausau waived its right to prevent Holt from gaining
access to discoverable information. Defendants argue that Wausau has merely
asserted unsubstantiated, general allegations of harm, without identifying any specific
documents that would lead to the disclosure of confidential information, and has simply
not provided good cause for the court to issue a protective order in this matter. As a
procedural matter, defendants question how the case would move forward if the court
grants the requested protective order - Holt would have to leave depositions, or even a
trial, when particular topics arise. As for the magistrate’s reference to Fed. R. Evid. 408,
it does not form the sole basis of her decision, and if it were removed, the remaining
portions of the Order stand on their own in denying Wausau’s motion for a protective
order.
By filing this declaratory action, Wausau chose to put its settlement decisionmaking process in the Holt Litigation at issue in this declaratory action, and chose to
make Holt a defendant. Wausau should not be permitted to exclude any discovery from
the very party they deliberately brought into the action. By bringing the declaratory
action, Wausau made its good or bad faith the very issue to be resolved. Compare,
United States Fire Ins. Co. v. City of Warren, 2012 U.S. Dist. LEXIS 58353, 19-21 (E.D.
Mich. Apr. 26, 2012) (court determined that declaratory action was a contract
construction case with no cause of action for bad faith breach injected into the case by
plaintiff, therefore plaintiff did not waive claims of privilege by initiating the action).
Wausau’s complaint alleges that Wausau “has acted appropriately under applicable law
and not in bad faith with respect to the Holt Lawsuit.” And Wausau “has not engaged in
the arbitrary, reckless, indifferent or intentional disregard of the interest of Reliable or
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Ushe with respect to the Holt Lawsuit.” (Complaint ¶¶ 26, 27).
The magistrate judge’s reliance on FRE 408 is misplaced, but her findings that
Wausau raised the issue whether it acted in bad faith and named Holt as a defendant,
and that Wausau bears the burden of making a good cause showing that a protective
order is necessary to protect it from oppression or undue burden, are accurate and
proper. The magistrate judge specifically found that Wausau did not “allege” any of
these grounds to support a protective order. While Wausau did allege oppression and
undue burden, it did not give any concrete examples, and its real arguments are along
the lines of potential prejudice if there is a retrial. The magistrate judge’s denial is
supported by the fact that Wausau has not met its burden with sufficient evidence of
annoyance, embarrassment, oppression, or undue burden or expense.
Plaintiff’s objections to the magistrate judge’s denial of a protective order are
overruled. Plaintiff’s motion to stay is denied as moot.
It is so ordered.
Dated: May 3, 2016
s/George Caram Steeh
GEORGE CARAM STEEH
UNITED STATES DISTRICT JUDGE
CERTIFICATE OF SERVICE
Copies of this Order were served upon attorneys of record on
May 3, 2016, by electronic and/or ordinary mail.
s/Marcia Beauchemin
Deputy Clerk

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